AGI (Adjusted Gross Income)
Your total gross income minus specific deductions, used to determine tax liability and eligibility for credits.
What You Need to Know
AGI is one of the most important numbers in your tax return. It's your total income after certain "above-the-line" deductions, and it determines your eligibility for many tax benefits.
Formula: AGI = Gross Income
- Above-the-Line Deductions
Gross Income Includes:
- Wages, salary, tips
- Self-employment income
- Investment income (dividends, capital gains)
- Rental income
- Retirement distributions
- Unemployment, Social Security (sometimes)
Above-the-Line Deductions:
- Traditional IRA contributions ($7,000 limit)
- Student loan interest ($2,500 limit)
- HSA contributions
- Self-employment tax (half of it)
- Educator expenses ($300)
- Moving expenses (military only)
Example Calculation:
- Salary: $75,000
- Investment income: $5,000
- Gross Income: $80,000
Deductions:
- IRA contribution: -$7,000
- Student loan interest: -$2,000
- AGI: $71,000
Why AGI Matters: Many tax benefits phase out at higher AGI levels:
- Roth IRA contributions (limit: $146,000-$161,000 single)
- Child Tax Credit (phases out at $200,000+)
- Education credits (phases out based on AGI)
- Premium tax credits for health insurance
Modified AGI (MAGI): Some benefits use MAGI, which adds back certain deductions. Each tax benefit defines MAGI differently.
Lowering AGI = More Benefits: Maximizing above-the-line deductions (IRA, HSA) reduces AGI and unlocks more tax breaks.
Sources & References
This information is sourced from authoritative government and academic institutions:
Related Calculators & Tools
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Related Terms in Career & Income
After-Tax Income
Your take-home pay after federal, state, and payroll taxes are deducted—the actual money you can spend.
FICA (Federal Insurance Contributions Act)
Payroll taxes that fund Social Security and Medicare, totaling 7.65% of wages for employees (matched by employers).
Gross Income
Your total income before any taxes or deductions are taken out—the starting point for tax calculations.
Marginal Tax Rate
The tax rate applied to your last dollar of income—the rate you pay on additional earnings.
Standard Deduction
A fixed dollar amount that reduces your taxable income, available to all taxpayers who don't itemize.
Tax Bracket
The range of income taxed at a specific rate under the U.S. progressive tax system.